Question 1

Cash collected and recorded by a company but not yet reflected in a bank statement are known as
A)debit memos.
B)credit memos.
C)outstanding checks.
D)deposits in transit.

Accepted Answer

Cash collected and recorded by a company but not yet reflected in a bank statement are known as deposits in transit. Outstanding checks are checks issued by a company but not yet presented to the bank for payment. Debit memos are a record of a decrease in the company's account balance, while credit memos are a record of an increase in the account balance.

Question 2

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-Consists of the methods and records used to identify, measure, record, and communicate financial information about a business

Accepted Answer

Accounting system consists of the methods and records used to identify, measure, record, and communicate financial information about a business.

Answer: E
 Internal control system refers to the policies, procedures, and practices implemented within an organization to ensure that its goals are met effectively and efficiently and that its assets are protected from unauthorized use, theft or loss.

Answer: F
 Safeguarding refers to the measures put in place to prevent or minimize the risk of theft, fraud, or other unauthorized activities that could harm an organization.

Answer: G
 Segregation of duties refers to the separation of tasks and responsibilities within an organization in such a way that no single individual has control over all aspects of a transaction or process.

Answer: D
 Control environment refers to the overall attitude, awareness, and actions of management and employees regarding the importance of control and the quality of compliance with policies and procedures.

Answer: C
 Control activities refer to the specific policies, procedures, and practices that are implemented to ensure that management directives are carried out and that risks are mitigated.

Answer: B
 Business process risks refer to the risks associated with the various processes within an organization, including the risk of errors, fraud, theft, or other losses that could impact the organization's financial performance and reputation.

Answer: H
 Strategic risks refer to the risks associated with the long-term goals and plans of an organization, including the potential impact of changes in the business environment, competition, regulatory requirements, and other external factors.

Question 3

How are cash equivalents reported or disclosed in the financial statements?
A)They are included with cash as a current asset on the balance sheet.
B)They are only reported on the statement of cash flows.
C)They are only disclosed in the notes to the financial statements.
D)They are included with short-term investments as a current asset on the balance sheet.

Accepted Answer

Cash equivalents are included with cash as a current asset on the balance sheet because they are highly liquid investments that can be easily converted into cash.

Question 4

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-The collection of environmental factors that influence the effectiveness of control procedures

Accepted Answer

The collection of environmental factors that influence the effectiveness of control procedures is known as the control environment.

Answer: B
 Business process risks are the risks associated with the particular processes and operations of a business.

Answer: C
 Control activities are the policies and procedures put in place to mitigate risks and achieve the organization's objectives.

Answer: E
 An internal control system is the framework of policies and procedures put in place to ensure the effectiveness and efficiency of operations, the integrity of financial reporting, and compliance with applicable laws and regulations.

Answer: F
 Safeguarding refers to the measures put in place to protect the assets, resources, and information of an organization.

Answer: G
 Segregation of duties refers to the separation of responsibilities and authorities within an organization to prevent any individual from having control over a transaction from its initiation to its completion.

Answer: H
 Strategic risks are the risks associated with the strategic decisions and actions of an organization, which may impact its long-term success and sustainability.

Question 5

Match the following terms with their correct definition.
a.Cash equivalents
c.Operating cycle
b.Cash over and short
d.Petty cash
-The elapsed time between the purchase of goods for resale and the collection of cash from customers

Accepted Answer

The operating cycle is the elapsed time between the purchase of goods for resale and the collection of cash from customers. A represents short-term, highly liquid investments that are easily convertible into cash. B represents the difference between actual cash received and the amount expected to be received. D represents a small amount of cash kept on hand for minor expenses.

Question 6

Which one of the following statements is true?
A)Sound internal control practice dictates that disbursements should be made by check.
B)Good cash management practice dictates that large cash balances should be maintained.
C)The person handling cash should also prepare the bank reconciliation.
D)Petty cash can be substituted for a checking account to expedite the payment of all disbursements.

Accepted Answer

Disbursements should be made by check as it provides a clear audit trail and reduces the risk of fraud and errors. Cash payments should be minimized and should only be made in exceptional circumstances where other payment methods are not feasible.

Question 7

Match the following terms with their correct definition.
a.Cash equivalents
c.Operating cycle
b.Cash over and short
d.Petty cash
-Amounts on deposit with financial institutions and investments primarily held in money market accounts, with original maturities of less than 90 days

Accepted Answer

Cash equivalents are defined as amounts on deposit with financial institutions and investments primarily held in money market accounts, with original maturities of less than 90 days.

Question 8

Which of the following is not included in Cash and Cash Equivalents on a company's balance sheet?
A)a savings account at the bank
B)a checking account at the bank
C)a bank certificate of deposit for one year
D)petty cash

Accepted Answer

Cash and Cash Equivalents include highly liquid investments that are typically convertible to known amounts of cash within three months or less. A bank certificate of deposit for one year does not qualify as it exceeds the three-month maturity period typically associated with cash equivalents. Savings accounts, checking accounts, and petty cash are all considered highly liquid and thus are included in Cash and Cash Equivalents.

Question 9

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-Action that reduces the likelihood that records could be used to conceal intentional misstatements, theft, or fraud

Accepted Answer

The answer of Match the following terms with their correct...

Question 10

Checks presented for payment and paid by the bank are known as
A)certified checks.
B)NSF checks.
C)outstanding checks.
D)canceled checks.

Accepted Answer

Checks presented for payment and paid by the bank are referred to as canceled checks, as they have already been processed and paid out by the bank. Certified checks are checks guaranteed by the bank, NSF checks are checks that have been returned due to insufficient funds, and outstanding checks are checks that have been issued but not yet cleared by the bank.

Question 11

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-Collective term for procedures put into place to ensure that employees operate within the scope of their assigned responsibilities and act for the good of the business

Accepted Answer

An Internal control system encompasses the collective procedures and mechanisms put in place by an organization to safeguard assets, ensure accurate and reliable financial reporting, promote operational efficiency, and encourage adherence to prescribed managerial policies, including ensuring that employees operate within the scope of their responsibilities and act for the good of the business.

Question 12

Which one of the following would never be considered a cash equivalent?
A)U.S. Treasury bills
B)corporate commercial paper
C)money market funds
D)common stock issued by a corporation

Accepted Answer

Common stock issued by a corporation is not considered a cash equivalent as it represents ownership in a company and is subject to fluctuation in value. The other options (U.S. Treasury bills, corporate commercial paper, and money market funds) are all considered cash equivalents as they are highly liquid and have a maturity date of 3 months or less.

Question 13

Each of the following items is considered a cash equivalent except
A)a 30-day certificate of deposit.
B)60-day corporate commercial paper.
C)a 75-day U.S. Treasury bill.
D)a 180-day note issued by a local government.

Accepted Answer

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Typically, only investments with original maturities of three months or less qualify. A 180-day note exceeds this duration and is therefore not considered a cash equivalent.

Question 14

Match the following terms with their correct definition.
a.Cash equivalents
c.Operating cycle
b.Cash over and short
d.Petty cash
-A fund used to pay for small amounts to avoid the time and expense of paying by check

Accepted Answer

Petty cash is a fund used to pay for small amounts to avoid the time and expense of paying by check. The other options are not related to petty cash.

Question 15

Which of the following is not considered to be a Cash Equivalent?
A)corporate commercial paper due in 60 days after purchase
B)U.S. Treasury bills with an original maturity of six months
C)a money market account with a stock brokerage firm
D)a certificate of deposit with a term of 75 days when acquired

Accepted Answer

The answer of Which of the following is not considered...

Question 16

Match the following terms with their correct definition.
a.Cash equivalents
c.Operating cycle
b.Cash over and short
d.Petty cash
-An account used to record any discrepancies between the cash records and the actual amount of cash received

Accepted Answer

Cash over and short is an account used to record any discrepancies between the cash records and the actual amount of cash received.

Question 17

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-Risks associated with how the company allocates its resources to meet its objectives

Accepted Answer

The answer of Match the following terms with their correct...

Question 18

Match the following terms with their correct definitions.
a.Accounting system
e.Internal control system
b.Business process risks
f.Safeguarding
c.Control activities
g.Segregation of duties
d.Control environment
h.Strategic risks
-Providing physical protection of the company's assets

Accepted Answer

Safeguarding refers to providing physical protection of the company's assets.

Answer: G 
 Segregation of duties refers to separating conflicting duties among different individuals to reduce the risk of errors or fraud.

Note: The other terms are also related to internal controls, but their definitions do not directly relate to providing physical protection of assets.

Question 19

Effective cash management and control for a company's operating cycle includes all of the following except
A)the use of a petty cash fund.
B)the preparation of monthly bank reconciliations.
C)the practice of using surplus cash for the purchase of bonds or other long-term investments.
D)the practice of keeping inventory levels low.

Accepted Answer

While all of the other options contribute to effective cash management and control, using surplus cash for long-term investments is not directly related to managing a company's operating cycle. It may be a wise use of cash in general, but it does not have an immediate impact on the day-to-day cash flow needs of the business.

Question 20

Which of the assets listed below is considered the most liquid?
A)Accounts receivable
B)Cash
C)Inventory
D)Prepaid insurance

Accepted Answer

Cash is considered the most liquid asset because it can be easily and quickly converted into other assets, such as goods or services, or used to pay off debts. Accounts receivable, inventory, and prepaid insurance are all less liquid assets because they may take time or effort to convert into cash.

Quiz 4: Internal Control and Cash

Cash collected and recorded by a company but not yet reflected in a bank statement are known as

How are cash equivalents reported or disclosed in the financial statements?

Match the following terms with their correct definition. a.Cash equivalents c.Operating cycle b.Cash over and short d.Petty cash -The elapsed time between the purchase of goods for resale and the collection of cash from customers

Which one of the following statements is true?

Match the following terms with their correct definition. a.Cash equivalents c.Operating cycle b.Cash over and short d.Petty cash -Amounts on deposit with financial institutions and investments primarily held in money market accounts, with original maturities of less than 90 days

Which of the following is not included in Cash and Cash Equivalents on a company's balance sheet?

Checks presented for payment and paid by the bank are known as

Which one of the following would never be considered a cash equivalent?

Each of the following items is considered a cash equivalent except

Match the following terms with their correct definition. a.Cash equivalents c.Operating cycle b.Cash over and short d.Petty cash -A fund used to pay for small amounts to avoid the time and expense of paying by check

Which of the following is not considered to be a Cash Equivalent?

Match the following terms with their correct definition. a.Cash equivalents c.Operating cycle b.Cash over and short d.Petty cash -An account used to record any discrepancies between the cash records and the actual amount of cash received

Match the following terms with their correct definitions. a.Accounting system e.Internal control system b.Business process risks f.Safeguarding c.Control activities g.Segregation of duties d.Control environment h.Strategic risks -Providing physical protection of the company's assets

Effective cash management and control for a company's operating cycle includes all of the following except

Which of the assets listed below is considered the most liquid?